2009 Performance: Rebalancing was critical
I just finished updating client performance for the first half of 2009. One of the issues I have been grappling with is the importance of rebalancing your portfolio to benchmark in volatile markets.
As the markets were cratering in the fourth quarter 2008 and first quarter of 2009 not rebalancing was a positive contribution to performance. You held less of what was falling the most relative to the benchmark. However given the rebound in the second quarter owning less of what went up the most was a drag on performance. If you look on a month to month basis as I do, the rebalancing decision was even more important the last 12 months.
Many experts have poo pooed the the rebalancing decision as not all that important. In normal markets that may be true, but in volatile markets it can make a significant difference in performance.
As the markets were cratering in the fourth quarter 2008 and first quarter of 2009 not rebalancing was a positive contribution to performance. You held less of what was falling the most relative to the benchmark. However given the rebound in the second quarter owning less of what went up the most was a drag on performance. If you look on a month to month basis as I do, the rebalancing decision was even more important the last 12 months.
Many experts have poo pooed the the rebalancing decision as not all that important. In normal markets that may be true, but in volatile markets it can make a significant difference in performance.
Posted by Bradley Fluetsch at 7/23/2009 7:11 AM 
Categories: Asset Allocation
Tags: stock retirement return Investment performance income rebalance bond equity year to date money quarter asset allocation
Categories: Asset Allocation
Tags: stock retirement return Investment performance income rebalance bond equity year to date money quarter asset allocation
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